IMF applauds CBN’s reforms, naira stability

The International Monetary Fund (IMF) has endorsed Nigeria’s recent financial sector reforms, particularly those led by the Central Bank of Nigeria (CBN) under Governor Olayemi Cardoso. In its 2025 Article IV Consultation report, the Fund praised sweeping changes to the foreign exchange regime, monetary tightening, and banking sector recapitalisation, all of which have contributed to macroeconomic stability, naira strengthening, and rising market confidence. The review signaled growing global approval for Nigeria’s efforts to restore investor trust, deepen financial inclusion, and build a more resilient economy, writes JOSEPH INOKOTONG.

The International Monetary Fund (IMF) has delivered an encouraging assessment of Nigeria’s financial reforms, stating that the measures, especially those spearheaded by the Central Bank of Nigeria (CBN), are yielding positive outcomes. The endorsement came through the Fund’s Article IV Consultation, which highlighted how reforms in the foreign exchange market, banking recapitalisation, and fiscal discipline have helped stabilize the economy and reinforce investor confidence.

According to the IMF, Nigeria’s macroeconomic framework has strengthened, particularly due to the CBN’s actions to unify exchange rates, improve forex liquidity, and eliminate the backlog of unfulfilled FX obligations that previously stifled market operations.

In January 2025, Nigeria successfully returned to the Eurobond market, its first issue in four years, reflecting, as the IMF noted, “strengthened investor confidence” and “a resumption of portfolio inflows.”

The Fund “recognised actions to strengthen the banking system, including the ongoing process of increasing banks’ minimum capital,” as stated in the IMF Executive Board Assessment. It also “welcomed the authorities’ efforts to boost financial inclusion and promote capital market development.”

As stated in the IMF Executive Board Assessment, the Fund “welcomed progress made in strengthening the AML/ CFT framework”, Anti-Money Laundering and Combatting the Financing of Terrorism. It “stressed the importance of resolving remaining weaknesses to exit the FATF grey list,” a designation for jurisdictions under increased monitoring by the Financial Action Task Force due to gaps in their anti-financial crime regimes. “Further significant challenges remain. Inflation, though declining, remains a burden. Infrastructure deficits, insecurity, and fiscal slippages could derail progress. The Fund highlighted “the importance of tackling security, red tape, agricultural productivity, infrastructure gaps, including boosting electricity supply, as well as improved health and education spending, and making the economy more resilient to climate events.”

Naira stability, fx inflows show strong reform momentum

The report commended the introduction of the “willing-buyer, willing-seller” FX framework and the use of the B-Match digital platform, both of which have improved transparency and efficiency in forex trading. The naira has since stabilised, and the exchange rate gap between official and parallel markets has narrowed significantly—from over 60 per cent to less than 3 per  cent.

As of Q1 2025, foreign exchange inflows surged to $6.9 billion, and gross external reserves climbed to $40.9 billion by the end of 2024, providing over eight months of import cover. This achievement surpasses international benchmarks and reflects a more resilient external sector.

Tight monetary policy, fiscal prudence welcomed

The IMF acknowledged the CBN’s sustained tight monetary stance, noting it was necessary to entrench disinflation. The Fund praised the cessation of deficit financing by the CBN and ongoing efforts to improve central bank independence, a critical move toward formal inflation targeting.

It also called for the phased removal of capital flow restrictions, urging that exchange rate flexibility be preserved to cushion external shocks. Additionally, the IMF Directors recommended a neutral fiscal stance, targeted growth investments, and expedited cash transfer programmes to support vulnerable populations.

Bank recapitalisation to power a $1 trillion economy

A major pillar of the CBN’s reform agenda is the recapitalisation of commercial banks. The minimum capital requirement is set to increase significantly by March 2026, a move that will equip banks to weather economic shocks and support Nigeria’s ambition to build a $1 trillion economy.

The IMF welcomed this initiative, noting it will expand credit access, strengthen balance sheets, and prepare the financial sector for deeper economic engagement. Alongside this, the CBN is ramping up financial inclusion initiatives, including digital onboarding platforms and gender-focused programmes such as the Women’s Financial Inclusion Initiative (Wi-Fi).

FX reserves rebound, confidence rebuilds

The CBN reported that Nigeria’s Net FX Reserve (NFER) position rose to $23.11 billion at the end of 2024, up from just $3.99 billion a year earlier, the highest level in over three years. The NFER, which adjusts gross reserves to account for near-term liabilities such as FX swaps and forward contracts, is widely regarded as a more accurate indicator of the foreign exchange buffers available to meet immediate external obligations. Gross reserves also rose to $40.19 billion from $33.22 billion in December 2023.

The increase in reserves reflects a combination of strategic measures undertaken by the CBN, including a deliberate and substantial reduction in short-term foreign exchange liabilities – notably swaps and forward obligations. The strengthening was also spurred by policy actions to rebuild confidence in the FX market and increase reserve buffers, along with recent improved foreign exchange inflows – particularly from non-oil sources. The result is a stronger and more transparent reserves position that better equips Nigeria to withstand external shocks. The expansion occurred even as the CBN continues to reduce short-term liabilities, thereby improving the overall quality of the reserve position.

Governor Cardoso attributed the turnaround to deliberate reforms, including reducing short-term forex liabilities and streamlining FX operations. The central bank also cleared a backlog of over $7 billion in forward obligations, restoring the confidence of local and international investors.

“This improvement in our net reserves is not accidental,” Cardoso said. “It is the outcome of deliberate policy choices aimed at rebuilding confidence, reducing vulnerabilities, and laying the foundation for long-term stability. We remain focused on sustaining this progress through transparency, discipline, and market-driven reforms.”

Reserves have continued to strengthen in 2025. While the first quarter figures reflected some seasonal and transitional adjustments, including significant interest payments on foreign-denominated debt, underlying fundamentals remain intact, and reserves are expected to continue improving over the second quarter of this year. Going forward, the CBN anticipates a steady uptick in reserves, underpinned by improved oil production levels, and a more supporting export growth environment expected to boost non-oil FX earnings and diversify external inflows. The CBN remains committed to prudent reserve management, transparent reporting, and macroeconomic policies that support a stable exchange rate, attract investment, and build long-term resilience.

Cbn enhances remittance flows, attracts foreign capital

Foreign exchange inflows remain vital for economic stability. The CBN has taken aggressive steps to attract diaspora remittances and boost foreign investment. This includes licensing new International Money Transfer Operators (IMTOs), improving naira liquidity for IMTOs, and updating foreign exchange guidelines to promote transparency and efficiency.

According to Aminu Gwadabe, President of the Association of Bureaux De Change Operators of Nigeria (ABCON), these reforms reflect the CBN’s creativity and resolve. “The reforms are driving confidence and increasing dollar inflows,” he said, pointing to Nigeria’s annual remittance figures, estimated at $23 billion.

There are also other sources and policies that are being explored by the apex bank to keep dollar inflows coming. According to him, the CBN’s initiatives have supported continued growth in these inflows, aligning with the institution’s objective of doubling formal remittance receipts within a year. The remittances in the economy is expected to increase based on  CBN’s ongoing efforts to bolster public confidence in the foreign exchange market, strengthen a robust and inclusive banking system, and promote price stability, which is essential for sustained economic growth.

Director of Trading at Verto, Charlie Bird, affirmed that the foreign exchange market is now more investor-friendly, with easier fund repatriation for foreign airlines and businesses. “Nigeria is becoming a top destination for foreign portfolio investors again,” Bird said at a recent asset management seminar.

New products, guidelines to spur diaspora engagement

The CBN has also launched new diaspora-targeted financial products and updated its operational guidelines for IMTOs. These and other measures, include the granting licenses to new International Money Transfer Operators (IMTOs), implementing a willing buyer-willing seller model, and enabling timely access to naira liquidity for International Money Transfer Operators (IMTOs). These updates aim to streamline the remittance process and provide easier access to naira liquidity for remittance providers. One such measure, titled “New Measures to Enhance Local Currency Liquidity for Settlement of Diaspora Remittances,” commits the apex bank to ensuring timely disbursement of remittances via formal channels. It introduces measures aimed at providing licensed IMTOs with access to Naira liquidity from the CBN, facilitating the disbursement of remittances to beneficiaries. This is expected to improve transparency, widen inclusion, and ensure that remittances play a greater role in Nigeria’s economic development.

Cautious optimism despite remaining risks

While the IMF’s report was broadly positive, it also flagged ongoing structural challenges: high inflation, infrastructure gaps, insecurity, red tape, and climate vulnerability. The Fund urged the Nigerian government to address these issues head-on by increasing health and education spending, expanding electricity access, and improving agricultural productivity.

Nonetheless, real GDP growth is projected at 3.4 per cent in 2025, buoyed by increased oil output, the commissioning of the new domestic refinery, and a robust services sector. Medium-term growth is forecast to remain stable around 3.5 percent, assuming reform momentum continues.

Reform path gains global recognition

The IMF’s review stands as a powerful endorsement of the CBN’s reform-driven agenda. By dismantling opaque systems, boosting reserves, restoring investor confidence, and championing financial inclusion, Nigeria’s apex bank has charted a course toward macroeconomic stability and long-term growth.

While challenges remain, the trajectory is clear: Nigeria is regaining its footing in global financial markets, with the CBN’s transparent, market-oriented approach serving as the cornerstone of its economic recovery.

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